How Will Retail Finish 2012?

With cold weather on the way and Christmas nipping at its heels, retailers are moving into the busy season. Weak sales data from the beginning of the summer has slowly been replaced by a rosier picture as the days have gotten shorter. September's strong same-store sales data has added a new sheen to the image, and investors have good reason to be optimistic going into the holiday season. Here are some of the highlights from last week's announcements, along with a view of things to come.

September same-store sales summaryLots of big names are celebrating a strong September, and the outlook for consumers should keep the companies and their investors excited about the end of the year. The Limited (NYS: LTD) reported an increase of 5% in comparable sales last month, while the company's year to date position is even stronger, standing at 7%. Gap (NYS: GPS) saw a similarly sized increase, with sales up 6%. That beat analyst estimates, and helped push the stock up to a 2012 high last Friday.

On the downside, The Buckle (NYS: BKE) saw same-store sales fall 1%, compared to the expectation of a 1% increase. The company is still ahead of its 2011 pace, with year-to-date same-store sales up 3%, but September's fall is a clear setback from the strong 4.5% growth seen in August. The company reported that the fall was due mainly to weak sales on the women's side of the business, which pulled down an increase seen in men's sales. While I've been very bullish on Buckle, I'm worried about the impact that any pullback at this point in the year could have on holiday sales.

In the broader retail arena, Target (NYS: TGT) reported weaker-than-anticipated sales growth of 2.1%. The company just missed estimates of 2.2%, but the stock rose nonetheless. Investors are hopeful that a favorable income tax position will increase earnings per share. Target had forecast a $0.14 difference in GAAP and adjusted EPS, but is now looking to narrow that margin.

Ross (NAS: ROST) beat analysts' projections with a 5% increase in sales, bringing the company's year-to-date same-store sales increase to 8%. That helped push the company to increase earnings guidance for its third quarter, now projected in the $0.70-$0.71 range. The increase represents an 11% increase in guidance.

Holiday sales forecastsWhile forecasts vary in degree, the consensus is for holiday growth in the low single digits. The National Retail Federation is predicting a 4.1% increase in holiday sales. That would fall short of last year's 5.6% increase, but would still be good news for companies and investors. While Americans still have concerns about unemployment and the uncertain outcome of next month's election, consumers are more confident now than they've been in the past seven months. Consumer confidence rose slightly in September, with Americans reporting more confidence in both their current situation and in the near future.

While all signs are pointing to a good Christmas season, there are a few unknowns that could damage confidence right when consumers need it most. The most pressing issue may be the coming fiscal cliff, which would appear in January if Congress doesn't come to a new agreement. Regardless of the political implications, the recurring headline could have a negative effect on consumer spending patterns. The NRFalso cited uncertainty in the future as being one of the major factors affecting this year's holiday forecast.

The bottom lineSeptember's same-store sales increase was good, if not fantastic. The pullback from August highlights the uncertainty that's setting in around the election and end of the year. But even with these headwinds, I'm confident that holiday sales will outpace the NRF prediction. In part, election jitters should be cleared up by this time next month. Once those are out of the way, consumers should start feeling more confident about their ability to predict their futures -- even if they're not happy with the prediction.